This is a must read article on the housing bust, especially for those in California (and bond investors). There is a rising trend of people who can afford housing payments walking away from their homes in California. There is a perverse logic to this. They are underwater on the loan and walking away allows them to get rid of the albatross of a house that is depreciating. In California mortgage lenders can't get anything more from those who default on mortgage loans then the house, so even though the people can pay, the lenders are stuck, and the borrowers lose only their down payment - if indeed, they even made one.
Here is another article laying out the reasoning behind this new development. Fascinating, and I believe the author is correct. This must have mortgage lenders shaking in their boots.
My question is, "who is going to invest in mortgage backed bonds in a falling housing market in states like California?"
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